Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Stock-Based Compensation Expenses

Components of stock-based compensation expense and related tax benefit for the years ended December 31 are as follows:

	2019		2018
Stock-based compensation expense (1)	$	40.7	$	1.8
Related tax benefit	(9.8)		(0.4)

⁽¹⁾ We include the impact of estimated forfeitures when determining stock-based compensation expense.

Schedule of Restricted Stock Unit Activity

RSUs granted to employees for the years ended December 31 are as follows:

(Units in millions)	2019		2018
Granted units	2.9		0.2
Weighted-average fair value	$	31.22	$	31.09

Changes in nonvested portion of RSUs for 2019 is summarized below:

(Shares in millions)	Shares	Weighted-Average Fair Value
Nonvested units at January 1, 2019	0.2	$	31.09
Granted	2.9	31.22
Vested	(0.8)	31.33
Forfeited	(0.1)	31.25
Nonvested units at December 31, 2019	2.2	30.42

Schedule of Performance Awards Activity

PA activity during the year ended December 31, 2019 is summarized below:

(Shares in millions)	Shares	Weighted-Average Fair Value
Nonvested awards at January 1, 2019	—	$	—
Granted	0.8	25.75
Vested	—	—
Forfeited	—	—
Nonvested awards at December 31, 2019	0.8	25.75

Schedule of Assumptions Used

The fair-value-based method for valuing each Elanco stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions noted in the following table, shown at their weighted-average values for the year ended December 31:

	2018
Expected dividend yield(1)	0.70	%
Risk-free interest rate(2)	3.07	%
Expected stock price volatility(3)	28.25	%
Expected term(4) (years)	6.5

⁽¹⁾ Determined using the expected quarterly dividend divided by the available three-month average stock price as of the valuation date, annualized and continuously compounded.

⁽²⁾ Determined using the term-matched, zero-coupon risk-free rate from the Treasury Constant Maturity yield curve, continuously compounded

⁽³⁾ Determined using a leverage-adjusted historical volatility of peer companies

⁽⁴⁾ Determined using SEC safe harbor approach, based on a 3-year cliff vesting schedule and 10-year contractual term.

Schedule of Stock Option Activity

Stock option activity during the year ended December 31, 2019 is summarized below:

(Shares in millions)	Shares of Common Stock Attributable to Options	Weighted-Average Exercise Price of Options		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value(1)
Outstanding at January 1, 2019	0.4	$	31.61
Granted	—	—
Exercised	(0.1)	31.61
Forfeited or expired	—	—
Outstanding at December 31, 2019	0.3	$	31.61	8.8	$	—
Exercisable at December 31, 2019	—	—		—	—

⁽¹⁾Market price of underlying Elanco common stock less exercise price. Options do not have an intrinsic value unless the market price exceeds the exercise price.

The following table summarizes data related to stock option activity:

	2019		2018
Weighted-average grant date fair value per stock option	$	10.21	$	10.21
Aggregate intrinsic value on exercise	0.10		—
Cash received upon exercise	1.9		—